Startup News

Since 2013, Patronicity has made a name for itself as a potent local crowdfunding tool in Detroit.

While many other crowdfunding platforms focus on scaling fundraising through a worldwide audience, Patronicity believes that many of those campaigns get lost in the white noise of too many projects. Their local-first business model helps each civic-and-community-minded project stand out.

This worked well for the Midtown-based startup—it brokered a deal with the state of Michigan to help promote local crowdfunding projects across the state and grew its staff to four. Now it's expanding further into the Midwest.

Patronicity is working with more than a dozen Indianapolis area sponsors to transform strategic Indianapolis neighborhoods into dynamic centers of culture, commerce and community by improving quality of life and spurring urban revitalization.

"We are excited about this new partnership to help create better neighborhoods in Indianapolis—one of our great American cities," Varuchia says. "Since Patronicity is based in the industrial Midwest, Detroit, we know the struggles. But, being a part of Great Places 2020 means we can help Local Initiatives Support Corporation and their partners to unlock the power of crowdgranting to create more vibrant communities."

Patronicity is also working with the Local Initiatives Support Corporation chapters in Michigan on projects in Kalamazoo and Detroit. The startup is also looking to expand elsewhere in the Midwest and East Coast later this year.

The Greening of Detroit is heading up a new initiative that aims to give the chronically unemployed careers, while also beautifying the city.

The Detroit Conservation Corps provides unemployed residents in Detroit, Hamtramck, and Highland Park job training and certification in the landscape industry. It's recruiting people who have struggled to overcome barriers to maintaining a full-time job, such as incarceration, substance abuse, homelessness, lack of education or job skills.

Helping these people become part of the everyday workforce isn't a simple task.

"Being able to recreate hope in the first couple of weeks is the biggest challenge," says Devon Buskin, workforce development director of the Greening of Detroit. "We have to build a trust because they have been disappointed so many times before."

The hope is for members of the Corps to start over and stabilize their lives. Participants receive training in landscaping, forestry, snow removal, and floral decor. Each eight-week session provides participants with technical training, work readiness skills, and case management services. Upon graduation, trainees are placed directly into jobs. It graduated 54 people from the program in June.

The Detroit Conservation Corps is partnering with the city of Detroit so they can work on local projects that are transforming the neighborhoods where the participants live into healthier, greener spaces. One such project is clearing and prepping nearly 300 vacant lots in the Fitzgerald neighborhood on the city's west side.

Greening of Detroit has set a goal to train and employ 2,500 Detroiters by 2020.

With the launch of Lake Brothers Beer Co. this spring, Sean Farrell and Mike Grodecki are two of the newest craft brewers in Detroit. They only produce a lager, but they have high expectations for it.

The brothers-in-law see the lager as their ticket into the micro brewing industry. It's a light, crisp beer that's been historically popular in the U.S. All of the marco brewers mass produced lagers for for much of the 20th Century, and it wasn't until the birth of the micro-brewery movement in the last 20 years that ales came back into favor.

"We have been inspired by the lagers of the old days," Farrell says. "We're trying to replicate that in today's market."

Brewing lagers is easier said than done. They typically need to brew longer and in colder temperatures, meaning they take more time and resources to produce.

Lake Brothers Beer Co. is making a classic lager with a light amber color. It's brewed out of the Brew Detroit facility in Corktown, packaged into 12-ounce cans and sold in boxed six packs. Patrons can buy them at independent retailers, bars, and restaurants across Metro Detroit, such as Mudgie's Deli in Corktown or Honey Bee La Colmena supermarket in Mexicantown.

Build Institute has made a name for itself with classes that help aspiring entrepreneurs in Detroit learn the basics of building a company or small businesses. To complement that, they're hosting a number of Build Bazaars pop-up marketplaces and Open City small business forums across the city this summer.

"We are more than just classes," says Christianne Sims, program manager for Build Institute. "People can go through our programs but they also have other resources available to them."

Build Bazaars are rotating pop-up marketplaces featuring products from small businesses in Detroit. Graduates of Build Institute's classes use the bazaars to help drive initial sales and get their businesses off the ground. The products range from artisanal candles and soap, to fresh baked goods and handmade wares.

Open City is where Detroit's aspiring and established small business owners go to network. The small forum is composed of a panel of speakers (selected by Build Institute) that discuss small business topics. The free gatherings take place on the third Monday of every month at the downtown bar Cliff Bells. (For more on Open City, check out this Model D article from 2015)

The first "on the road" event is the Brick By Brick: Building Community Through Small Business, which will focus on how small businesses are the anchors of their communities and the socio-economic hubs of the surrounding neighborhoods. It starts at 6 p.m. on June 20 and will be held at the Detroit Blues Café, 14493 Gratiot Ave.

"Detroit is more than downtown," Sims says. "We have so many commercial corridors."

Amy Swift is going on vacation soon. It may not be a full-on vacation, but she'll take it. That's because it will be the first time Swift has been away from her fledgling business, Building Hugger, for an extended-period of time.

"I have never left this work for this long since I started," Swift says. "Frankly, it scares me. But I'm not going to pass on this opportunity."

Building Hugger is a preservation-focused construction firm that does a lot of work in the lost trades of historic preservation like woodworking, but specializes in window restoration.

It's also growing quickly. Building Hugger currently employs 11 people with a goal of hitting 15 by the end of the year, up from four a year ago.

"It's not like there is a trade school for windows," Swift says. "We have to train everyone in-house."

This is not the time to take the hand off of the tiller of a fast-growing business. But the opportunity, a fellowship with the Tory Burch Foundation, is too good to pass up.

The New York-based foundation helps women entrepreneurs grow their businesses by providing access to capital, entrepreneurial education, mentoring and networking opportunities. The year-long fellowship comes with a three-day workshop, a $10,000 grant for business education, and the chance to pitch for a $100,000 investment.

Building Hugger is no stranger to finding clever ways to raise seed capital. It won a $10,000 challenge grant from NEIdeas last year and has raised thousands of dollars from Kiva Zip loan drives. Building Hugger also received a Motor City Match design grant to build out a specialty hardware store.

That money helped Building Hugger grow and create jobs over the last year. It recently moved into a bigger shop, which included its new hardware store, on Chene near Eastern Market.

Building Hugger has taken on a number of window restoration projects that have helped it double its revenue over the past year. Those projects include work on the Henry Ford Fair Lane Estate, the George Ladve House in Brush Park, and the Michigan State Capitol dome.

LoVasco got its start in 2013 as a small, family-owned consulting firm specializing in insurance, employee benefits and retirement services. The father-son team started out in a small space in the Buhl Building in downtown Detroit. Today it has grown to a point where it needed to move.

LoVasco recently relocated to 8,000 square feet of office space in the One Woodward Avenue building at the corner of Woodward and Jefferson avenues. It brought 20 employees with it to the 15th floor of the Minoru Yamasaki-designed skyscraper overlooking Hart Plaza and the Detroit River.

"It's really starting to feel like a home," says Michael LoVasco, executive vice president of LoVasco. "Everyone has a view of the water."

The LoVasco family went into business for itself in 1956 when John LoVasco (Michael LoVasco's grandfather) started selling insurance. Gene LoVasco (Michael LoVasco's father) joined the business in 1986. The family grew the company before selling it in 2007.

John LoVasco retired but Gene LoVasco kept working for the larger firm until his five-year contract expired. Then he and his son decided to give a family business another try.

"He was ready to be his own boss again," Michael LoVasco says. "We had talked about launching a business together."

So far it's working out quite well. The company grew its revenue by 50 percent in its first year and then another 30 percent the following year. This year LoVasco is on track to hit another double-digit revenue increase.

It's achieving this growth by serving primarily privately owned family businesses based in Michigan. Those companies range in size from a couple hundred employees to five-figure staffs.

Technology upgrades are an everyday part of our lives. New phones, computers, and entertainment centers are practically a rite of passage in the 21st Century. Cutting edge technology in public infrastructure, not so much.

"These are 15 to 30 year assets," says Jean Redfield, president & CEO of NextEnergy. "People expect a return for their decisions. And it can be hard for tech companies to penetrate these environments."

NextEnergy is partnering with DENSO, DTE Energy, and Wells Fargo to launch the challenge. The winner will receive up to $80,000 in seed capital from the Wells Fargo Foundation to demonstrate and validate its solution. Potential winning ideas could range from developing smart parking technologies to smart building solutions.

Developing those technologies is one thing. Getting the market to adapt to them is another. Most of those technologies are big-ticket items with, at best, a limited track record. It's a bet most aren't willing to make on their largest purchases.

"People have to see that they work in the context of the existing system before they are willing to try it," Redfield says.

NextChallenge: Smart Cities wants to bridge that gap. It is accepting applications through July 28. An information webinar will take place on June 9 between 2 and 3 p.m. For information, click here.

Castle, a property management software startup, hit a big milestone last week, locking down a little more than $2 million in seed capital. Model D recently profiled Castle, just before it announced this seed round.

The Detroit-based company has raised $2.75 million to date over its first two years of business. The startup's seed round was led by Kholsa Ventures out of Silicon Valley. SV Angel, and Point Judith Capital, also participated in the round.

"It's an incredible opportunity," says Max Nussenbaum, co-founder & CEO of Castle. "But it's not a success in and of itself. This is the fuel in the tank, not the end game."

Nussenbaum was part of the inaugural class of the Venture For America, serving his two-year fellowship in Detroit. He co-founded Castle with two other VFA Detroit fellows (Tim Dingman and Scott Lowe) while the trio renovated a tax foreclosed mansion in Virginia Park. Today that house is their home and the headquarters of Castle, but the company is also looking to move into its own offices in the greater downtown Detroit area later this year.

The trio of VFAers also used the experience renovating that house as a compelling story to help get Castle admitted to Y Combinator, arguably the most prestigious startup accelerator in the world, earlier this year.

Castle has developed a software platform that makes property management easy by automating communication between tenants and property managers, rent collection, and repair requests. It currently manages 525 units, almost all of those are single-family homes or small multi-unit buildings. All of the rentals are in Metro Detroit and about 60 percent are in the city of Detroit.

Castle's leadership teams plans to use the seed capital to continue building out its software platform. It's also looking at expanding outside of the Detroit market, potentially opening up a new market early next year. It hasn’t chosen a specific one yet, but among the candidates are Baltimore, Phoenix, Atlanta, and Florida.

"The early markets will be in line with Detroit," Nussenbaum says. "They are the ones that are underserved by our competitors."

Castle currently employs a team of about a dozen people and is still adding staff, including a head of growth in Detroit. The company’s team is currently aiming to double its units under management by the end of the year. Most of its new customers come from word-of-mouth recommendations.

"It's an incredible vote of confidence in us and we are so appreciative of it," Nussebaum says.

Patrick F. Hickey, Mark E. Hauck, Thomas S. Bishoff and Benjamin W. Jeffers have seen a lot of Detroit over the years. The four attorneys have more than 100 years of practicing law between them, all of it spent downtown. And now they're launching their own law firm, Hickey Hauck Bishoff & Jeffers.

"The two words I use to describe this are exciting and energizing," says Hickey.

Hickey and his partners like to draw a parallel between the birth of their new law practice and the rebirth of downtown Detroit as a vibrant city center. They have seen downtown Detroit have starts, and stops, and pauses over the last few decades. This time they believe it's the real thing, and want to be a part of it.

"We've found a lot of clients share our enthusiasm," Jeffers says.

The four co-founders of Hickey Hauck Bishoff & Jeffers previously served as members of Dykema law firm, one of Michigan's oldest law practices. They're now launching their own firm to focus on business law and employment litigation. It has expertise in a wide variety of areas ranging from automotive counseling and litigation to privately owned business disputes to non-compete counseling and litigation.

Hickey Hauck Bishoff & Jeffers is located at One Woodward Avenue. A team of seven people currently work from that office -- which is big enough to house nine attorneys and five support staff -- and the firm expects to add more.

Roslyn Karamoko didn't love Detroit at first. Plus, she had plenty of other city suitors.

Karamoko grew up in Seattle, and graduated from Howard University in Washington, D.C. with a degree in fashion merchandising. She worked in corporate retail buying in New York City and then around the world. When she got married a few years ago, Karamoko and her husband moved to his hometown of Detroit. Then she fell hard for the Motor City. So much so that she launched her own fashion label here: Détroit is the New Black.

She describes Détroit Is the New Black's aesthetic as Detroit history and minimalism combined into a dynamic, modern design for urban clothing. The 2-year-old company's website put this way: "Détroit Is the New Black is a mantra for rebirth, inspiration, authenticity and culture."

"It's something that speaks to all of the different layers here in the city," Karamoko says.

Détroit is the New Black moved into the Ponyride incubator in Corktown in mid-March. The fashion label's team of four people are working on producing a wide variety of clothes for both men and women, ranging from hoodies to varsity jackets to maxi dresses.

"It's a great incubator," Karamoko says. "It offers a great opportunity to cross pollinate with a lot of different brands here in the city."

Those clothes can be purchased online, at Detroit Historical Museum, the Charles Wright Museum, various boutiques across Metro Detroit, and at the company's factory store in Ponyride. Détroit is the New Black is working to open its own store in downtown Detroit later this year.

When Jon Koller first thought of turning his homemade beard balm into a business, he imagined how he would market it. Four years of business building and bootstrap pulling later, he gets to do that with Beard Balm.

And it's not just because Koller wants to do it -- he needs to. Beard Balm, based in Corktown's Ponyride, is selling its products around the world and closing in on $1 million worth of sales this year. Koller expects to hit the seven-figure milestone by the third quarter.

"We're about even now in sales with what we did all of last year," Koller says.

Beard Balm makes an all-natural, leave-in conditioner for beards and facial hair. The company uses natural products like lanolin oil, coconut oil, and beeswax from a Traverse City farm. Beard Balm sells in 1.5-ounce tins for $16 to $18 a pop. The regular balm and the "Naked," fragrance free version sell for $18 a piece.

Since releasing its Heavy Duty version a year ago, Beard Balm has focused on expanding sales by hooking up with a national distributor. Beard Balm's products can be bought in every state in the U.S., every country in the European Union, and 12 other countries around the world. Beard Balm has tripled the number of stores carrying its products in the last two months.

"We will probably double it again in the next three months," Koller says.

That success has prompted Beard Balm to grow its team to five people, and will likely add more soon. New hires will do everything from production work to helping with marketing and branding.

No one likes the dreaded daily commute to work, which is often costly and tedious. Thanks to the ride-sharing platform SPLT, there will be a little less dread in the morning.

The downtown Detroit-based startup is developing a software platform so companies can make it easier for their employees to ride-share. The mobile platform employs a social search feature to identify commuters -- both drivers and passengers -- going in the same direction for simple synching.

Workers save money in transportation costs, and companies do as well in having to provide less parking. SPLT has a couple of pilot projects underway and the initial results are encouraging.

"We have seen a 15 percent adoption rate for SPLT," says Anna Isachenko, operations czar at SPLT. "It's much better than the industry standard."

SPLT launched a paid pilot project with DTE Energy in November and started a second pilot project in February. It's getting ready to launch another pilot project in Ohio later this spring. That work has enabled SPLT to grow its team to seven people, along with an intern from Detroit Cristo Rey High School on the city's southwest side. SPLT is also looking at adding more interns this summer and a couple more employees.

"We might bring on more developers very soon," Isachenko says.

SPLT has a presence in San Francisco, New York City, Austin, Atlanta, Denver and Detroit. Its headquarters is in the Techstars incubator next to Ford Field. SPLT was part of Techstars Mobility’s first class in Detroit last summer.

The incubator program showed SPLT the potential behind a major pivot. Before graduating, the startup was aiming its platform straight at consumers. Techstars Mobility helped it target large companies instead.

Invest Michigan is nearing its second year in June and the non-profit that makes and manages small investments in early stage tech startups is celebrating by rounding out its team.

The downtown Detroit-based investment organization has hired a new associate out of Chicago to help with financial market and industry research. Invest Michigan now employs a team of six people from its perch in the Guardian Building, overseeing a growing number of angel investments in startups.

"We've had really good growth in the last 21 months," says Charlie Moret, president of Invest Michigan. "We have had 33 transactions in that time."

Invest Michigan oversees the Michigan Pre-Seed Fund 2.0, a multimillion dollar angel investment fund capitalized by the Michigan Economic Development Corp. It invests in Michigan-based tech startups, typically between $50,000 to $150,000. It has worked with a growing number of institutional investors (25 as of this spring) and Michigan's growing pool of angel investors. The combined power of these different factions helps spread more money around to more startups.

"Having a group of us to support these companies helps reduce the risk," Moret says.

The total size of the Michigan Pre-Seed Fund 2.0 grew to $10.5 million fund after a $2.5 million follow-on capital infusion by the MEDC last year. Moret says Invest Michigan has about between three and four years worth of investment capital in its reserves, including money put aside for follow-on investments in startups.

Follow-on investment -- worth between $50,000 and $150,000 -- is an increasingly used phrase at Invest Michigan. Of its 33 transactions so far, seven have been follow-on investments. These include fast-rising startups like TechTown-based ENT Biotech Solutions, along with Ann Arbor-based AdAdapted and Genomenon. The latter happened shortly after it placed second at last fall's Accelerate Michigan Innovation Competition. Moret expects more of those follow-on investments to continue as the fund matures.

"We hold the additional capital from MEDC as a reserve so we can continue to support our startups with more investment," Moret says.

Michigan's venture capital community continues its rise with another year of growth, and Detroit's tech scene is playing a significant role.

With $328 million in 2015, Michigan enjoyed its best year of venture capital investment. That's up from $224 million the year before, and $246 million from the second highest year in 2012, according to a new report from the Michigan Venture Capital Association. In total over the last decade, Michigan has seen a 150 percent increase.

Detroit's rise as a center for tech mirrors that climb. There was little to no venture capital activity downtown 10 years ago. Today, it's home to several venture capital firms that make early stage investments in tech firms, many of which are based in or near Madison Block. One of Michigan's two largest VC funds, the Renaissance Venture Capital Fund, a fund so large it only invests in smaller VCs, is also located downtown.

"Detroit is a big area of focus," says Maureen Miller Brosnan, executive director of the Michigan Venture Capital Association. "Automotive and IT technologies are a great areas of growth."

VC growth is happening at a time when it's on the wane across the U.S. According to the same Michigan Venture Capital Association report, the number of venture capital firms headquartered in Michigan, their total capital under management, and number of venture capital investments made in Michigan, has doubled and in some cases tripled while those numbers have decreased nationally.

That build up has come from a combination of capital from private and public sources. While the Renaissance Venture Capital Fund has accumulated its money from private funds, it's counterpart the Venture Michigan Fund got its backing from government. The Michigan Department of Treasury helped establish local VC infrastructure over the last decade, including the Venture Michigan Fund, by providing investors with up to $450 million of tax-voucher certificates.

Future support from the state of Michigan, however, is not guaranteed. That doesn't mean anyone is deterred. Rather, they're striving for greater self-sufficiency.

"Firms are looking at this and saying we’re going to have to do this on our own," Brosnan says.

Detroit's economy has gotten some good press in recent years. That has helped power growth at longtime Detroit PR firm, Franco Public Relations Group.

Based in the Renaissance Center, the firm's revenue spiked nearly 30 percent in 2015 after taking on new clients like Granite City Food & Brewery and a medical device company that is gearing up to launch its brand to the public.

"It's all tied back to the city and region growing again," says Tina Kozak, president of Franco Public Relations Group. "Companies moving to downtown will come to us because we are an agency that has been in the region for a long time."

Franco Public Relations Group has been around downtown Detroit for 52 years. It was one of the first tenants in the RenCen when it opened in the 1970s. Since then it has been a fixture in downtown Detroit through thick and thin. One of its longtime clients is the RenCen itself, where it helps new retail businesses make the biggest splash possible.

That work has allowed Franco Public Relations Group to expand its staff -- it has 22 employees after hiring two more over the last year.

"We want to keep building this team really strong," Kozak says. "We have the best team players in the city."